By Bo Erickson
WASHINGTON (Reuters) -Moody’s downgrade of the U.S. sovereign credit rating has elicited mixed responses among Republicans in Congress, with some questioning the motive behind the change and others depicting it as a warning that lawmakers should heed as they wrestle with a sweeping tax and budget bill.
The downgrade, announced on Friday evening, came only hours after a handful of Republicans on the U.S. House of Representatives’ budget committee blocked progress of President Donald Trump’s tax and spending legislation due to their concerns of its potential to balloon the federal deficit.
The credit rater is the last of the major ratings agencies to strip the U.S. of the highest rating of AAA. Moody’s, which cut the rating one notch to “Aa1”, said it was making the change because successive U.S. administrations of both parties and Congress have failed to reverse annual fiscal deficits and growing interest costs.
Moody’s argued that “current fiscal proposals under consideration” offered insufficient spending cuts.
Nonpartisan analysts estimate the proposed legislation, which in part would extend Trump’s 2017 signature tax cuts, could add trillions to the federal government’s $36.2 trillion in debt.
Representative Jason Smith, the Republican tax committee chairman shepherding the bill, said that Moody’s downgrade was “a cover-up of President Biden’s economic failures.”
“It’s hardly a surprise that the greatest economic cheerleader of Biden’s economic disasters refuses to recognize that Republicans have delivered $1.6 trillion in savings as part of the one, big, beautiful bill,” Smith, from Missouri, said in a statement, referencing the tax and budget legislation.
“This Moody’s downgrade is nonsense,” said Representative Jimmy Patronis, a Florida Republican. “Using credit ratings to hop in a news cycle is irresponsible of them.”
Moody’s did not immediately respond to a request for comment.
The criticism of the rating agency’s move echoes the response to Fitch’s credit downgrade in August 2023, when Biden administration officials argued decisions in Trump’s first term were the cause of the credit hit.
Other Republicans — including key tax bill holdouts — depict the downgrade as proof that their fiscal concerns on the proposed legislation are valid.
Representative Andy Harris, a Maryland Republican who leads the fiscal hardliners in the House Freedom Caucus, said in a social media post that the downgrade was a “signal that we can wait no longer to address the debt crisis” and that his support for the tax bill hinges on more spending cuts.
Moody’s estimated the nation’s debt burden could reach 134% of gross domestic product by 2035, compared with 98% in 2024.
TAX BILL ON THE LINE
House Speaker Mike Johnson has been locked in a multi-front negotiation within his conference as the party-line approach of Republicans – which enjoy a slim 220-213 majority in the lower chamber – means a small faction of lawmakers could sink the bill.
Despite a range of specific concerns from Republican lawmakers on aspects of the tax and budget bill, the legislation moved successfully through committee debates this week until Friday’s House budget meeting, where five Republicans joined Democrats to put the skids on the tax bill progress.
Republicans set a redo vote for late Sunday evening and said they were working through the weekend in the hope of reaching consensus.
“We have to deliver in extending the tax cuts but also getting the spending cuts necessary to get deficits down,” Representative Chip Roy, a Texas Republican, said after his Friday vote against moving the budget bill ahead.
Roy and other deficit hawks are pushing for more stringent work requirements for Medicaid, the low-income healthcare program, to kick in sooner to increase saving opportunities.
Such savings are a political high-wire act for Republicans, as more reductions to Medicaid and cuts to food assistance risk inflaming dissent from other Republicans concerned about the impact to their constituents.
“We need serious, responsible budgeting – not another reckless scheme that robs working families to reward the ultra-wealthy,” said Representative Brendan Boyle, the Pennsylvanian who is the top Democrat on the budget committee. “House Democrats are ready to govern. The question is whether Republicans are ready to wake up to the damage they’re causing.”
(Reporting by Bo Erickson in Washington; Editing by Frank McGurty and Diane Craft)
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